August 4 , 2014: Approximately 70 percent of the recent decline in health care spending growth from 2009-2011 was due to the economic downturn, and not to other factors such as health sector responses to the Affordable Care Act, according to a new study published in the August issue of Health Affairs.

Northwestern University economists use HCCI data to show that health spending is not recession proof

Washington, DC —Approximately 70 percent of the recent decline in health care spending growth from 2009-2011 was due to the economic downturn, and not to other factors such as health sector responses to the Affordable Care Act, according to a new study published in the August issue of Health Affairs. As the economy recovers, health spending is likely to increase at a faster pace, conclude the authors, David Dranove, Craig Garthwaite, and Christopher Ody of the Kellogg School of Management at Northwestern University.

“The source of the slowdown in health care spending growth, and whether this slowdown will continue, has been much debated,” said Dranove, a professor at the Kellogg School of Management at Northwestern University. “Our analysis shows that the slowdown was mostly due to the sluggish economy, not to structural change in the health care sector. The Affordable Care Act may ultimately succeed at reducing costs, but it hasn’t done so yet.”

The Northwestern researchers are among the first to pinpoint the effect of the economic slowdown on health care spending for the privately-insured, working-age population. They examined private insurance claims data covering 2007-2011 from the Health Care Cost Institute (HCCI) which represents the health care spending of nearly 47 million people with employer-sponsored insurance in all 50 states.

From 2009-2011, health spending growth for this population slowed by 2.6 percentage points from the previous two years. By calculating the overall decline in employment during this period, the authors predict that health spending growth would have been 1.8 percentage points higher if the economy had not faltered in 2008. Thus, they concluded that 70 percent of the decline in health care spending growth was the result of the stagnant economy.

“There has been disagreement over the years as to whether health spending is recession proof. This study shows it’s not,” said Garthwaite, an assistant professor at the Kellogg School of Management.

The analysis, which focuses on privately-insured individuals, highlights that the slowdown in health spending was not only caused by individuals who lost their jobs and employer-provided health insurance.

“Even individuals who retained insurance during the downturn reigned in their health spending. This demonstrates the broad effects of a recession on health spending,” said Garthwaite.

The researchers compared health spending in areas of the country affected by the economic downturn with areas that were largely unaffected. Insured people living in the hardest hit areas experienced the smallest increases in health spending.

For example, from 2008-2009, Las Vegas, Nevada—a particularly hard-hit region—experienced a 5.6 percentage point decline in the fraction of residents working. From 2007 to 2011, health spending in Las Vegas increased 5.4 percent. In contrast, Trenton, New Jersey saw a 1.6 percentage point decline in the fraction of residents working and a 29 percent increase in health spending.

The Kellogg School of Management at Northwestern University is an academic partner of HCCI. HCCI currently holds one of the largest private health insurance claims databases available for public reporting and academic research purposes.

“The majority of Americans have private insurance, so understanding their health spending patterns is critical to understanding what influences national health care expenditures,” said HCCI Executive Director David Newman. “Our partnerships with academic researchers like Northwestern are starting to shed light on the forces driving health care cost growth and foster solutions that lead to better and more affordable care.”

About the Health Care Cost InstituteThe Health Care Cost Institute promotes independent, nonpartisan research and analysis on US health care spending. HCCI believes a better understanding of the forces driving health care cost growth will help policy makers, researchers, and the public make decisions that will lead to more accessible and affordable care. HCCI is governed by an independent board that includes distinguished economists, actuaries and health care experts. For more information, visit www.healthcostinstitute.org or follow us on Twitter @healthcostinst

HCCI News

September 24, 2014– A study released today by the Health Care Cost Institute (HCCI) found that per capita health care spending for young adults (ages 19-25) with employer-sponsored insurance (ESI) grew at a rate nearly double that of other adults (ages 26-64) during 2011 and 2012, the first two years after implementation of the Affordable Care Act (ACA; Section 1001) that allows parents to include their adult children in family health plans.

September 9 , 2014: The Health Care Cost Institute (HCCI) and the National Academy for State Health Policy (NASHP) announced today that they are launching a new grant program to fund research studies that will analyze how the states are implementing the Affordable Care Act (ACA) and other health reforms.

September 4 , 2014: The Health Care Cost Institute (HCCI) announced today that Assurant Health will join three other major health insurance companies, Aetna, Humana and UnitedHealthcare, to work with HCCI as it develops free online tools that will offer consumers the most comprehensive information about the price and quality of health care services.

August 26 , 2014: Vermonters with employer sponsored health insurance spent less on health care but their spending grew faster than the national average in the years before implementation of the state’s health reform law, says a new study from the Health Care Cost Institute (HCCI) prepared in cooperation with the Green Mountain Care Board (GMCB).

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